Prabhudas Lilladher's research report on Westlife Foodworld
We attended WFL’s Strategy Day which outlined Vision 2027 and progress on Vision 2022. WFL has fulfilled the earlier target on most fronts, despite covid impact for 2 years. By end of CY27, WFL has indicated 580-630 stores, sales of 40-45bn, 15-17% Pre IND AS margins, 25% ROE, 40% ROCE, Rs14bn capex and dividend payout of 15-25%. We note that most of the guidance numbers are in line with our estimates. We believe WFL is well placed to capitalise on growth opportunity in the QSR space given 1) strong Menu innovations like Gourmet Burgers, Fried chicken, McCafe 2) strong store format with EOTF stores 3) rising salience of McDelivery and Digital sales 4) more focus on South with 60% of incremental stores given higher AUV & chicken sales and 4) accelerated store expansion plans in coming years. WFL guidance of 5% Royalty till FY26 and gradual increase thereafter is positive.
Outlook
We believe WFL has high probability to surpass Vision 2027, given strong growth momentum post covid. We estimate Sales CAGR of 27.3% over FY22- 25 with an EPS of Rs8.3/11.5/15 in FY23/24/25. We assign DCF based target price of Rs847 (no change). We maintain Buy and expect more calibrated returns incremental post sharp run up in past 6 months.
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